In 1991, I read a Barron's article by Ray Dalio (founder of Bridgewater Associates and currently worth about $22 billion) about the credit cycle (AKA Kondratiev wave, debt cycle, etc) and it's been in my mind ever since.  Today I read an engaging article by Brandon Smith which closely matches my own analysis over the past twenty years.

During the credit upcycle, investors demand interest rates higher than real economic growth.  For instance, during the 1970s, interest rates were as high as 20% but economic growth is generally a stable 3% to 6%.    The "credibility gap" between reality and paper is "Area 1" in this graph.

Under the rules of Keynesian equilibrium, the gap is eventually resolved during the credit downcycle, when real interest rates fall below the rate of economic growth and "Area 2" cancels out "Area 1".

The real inflation rate today is probably around 20%.   The Federal Reserve won't ever admit it but that rate is not a mistake or misjudgement.  They're deliberately burning debt to re-establish equilibrium.   I've expected the current environment for perhaps ten years, a defacto devaluation of debt through several years of 10%+ inflation, while keeping interest rates below 10%.  

There are now tens of millions of mortgages at 3% to 6% rates and at a yearly 10-20% inflation rate, those mortgages become income generators for borrowers although by an indirect and lengthy process of home equity.  This is why Blackwater has been buying up residential homes.  Effectively, the real growth rate would now exceed the true interest rate which is negative for lenders.  

This is what interest rates look like on the credit upcycle (1980 to 2020) and you can derive the equation that the Federal Reserve is working from:

K = economic growth (assume a constant of 4-5%)
D = total debt
I = average interest rate

K = D x I gives us our graph

The only way to maintain higher debt is through lower interest rates.  In theory, an infinite debt could be maintained at an interest rate of zero but there's won't be a lot of investors who give their money away for free.